The Reserve Bank of Australia today cut the cash rate to a record low of 1.75 per cent.
The cut, the first in a year, is seen by economists as a bid to head off falling prices and an economic downturn.
It came less than a week after a shock drop in core inflation to well below the central bank's 2 per cent to 3 per cent target band.
The historic interest rate reduction coincides with the federal government's third budget tonight.
The cash rate is now easily at its lowest level under the current system of monetary policy setting.
REINSW President John Cunningham said the RBA has acted after the consumer price index rose less than expected in March.
‘’All eyes are now on the banks to see if they will pass on the full 25 basis point reduction,’’ Mr Cunningham said.
“It is 12 months since the RBA cut interest rates to the previous low of 2.00 per cent and since then the banks have independently moved rates higher. The banks now have a duty to pass the full benefit onto consumers.
“Now is a good time to borrow money to purchase a property as the cost of capital is the best it has ever been.’’
The average variable home loan rate is set to drop to 4.40 per cent this month, following the Reserve Bank’s decision today to cut rates to 1.75 per cent.
Lender RateCity.com.au said at that rate, repaying the average, $300,000, 30-year home loan costs less than $50 per day.
“For anyone who’s already got a variable mortgage, today’s rate cut could save you around $45 a month – or over $500 a year – on the typical $300,000 home loan,’’ said Sally Tindall, money editor at RateCity.